Union-Busting for Big Three

Broken labor contracts only course of action.

Stay Connected

Unions, like democracy, work perfectly on paper. But both suffer a disconnect between concept and execution.

Unions first sprung up in 18th-century Europe when women and children joined armies of poorly paid male factory workers. As individuals, the factory workers were powerless to negotiate with their bosses. A union gave them a collective voice. They could band together to say, "You're getting rich off our labor, and you need to share that wealth with us - or we'll stop working." The factory owner would then have an incentive to improve wages and conditions.

Who but a factory owner could argue with its logic or fairness?

Unfortunately, somewhere along the way, unions forgot that the relationship between workers and owners is symbiotic. The 2 entities are natural allies, not enemies. Unions got drunk on their own power, and began working against the long-term profitability of their own companies.

According to the US Bureau of Labor Statistics, there are currently 15 million unionized workers in the US, which accounts for 12% of all workers. About 35% of public sector workers are unionized, compared to 7% of private industry workers. On average, a union worker makes 33% more than a non-unionized worker. Four out of 5 union workers have employer-financed pension plans. Only one-half of non-unionized workers do.

General Motors (GM), Ford (F) and Chrysler are all badly run companies with uninspiring product lines. In fact, most of their wounds are self-inflicted - but the unions have certainly done their share of the damage. And is there any sight more pathetic than those fleshy CEOs begging Congress for money?

It's not like there haven't been warning signs. The following editorial appeared in BusinessWeek in May 2005:

"With sales of $193 billion, GM stands as an icon of fading American industrial might. GM's payroll pumps $8.7 billion a year into its assembly workers' pockets. The carmaker is saddled with a $1,600-per-vehicle handicap in so-called legacy costs, mostly retiree health and pension benefits. Any day now, GM is likely to get slapped with a junk-bond rating."

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.